Reorganization with a permanent contract in the Netherlands

What does this mean for you?

This page explains your rights under Dutch employment law. It is written for employees who work in the Netherlands, including highly skilled migrants and other internationals. If you are employed on a permanent Dutch contract, the following applies to you regardless of your nationality.

A permanent contract is not untouchable

Many employees assume that a permanent contract is untouchable. It is not. Even with a contract for an indefinite period you can lose your job in a reorganization.

Your employer may allow jobs to be eliminated for business economic reasons (Article 7:669(3)(a) of the Dutch Civil Code, BW). If your position disappears as a result, your employment can be ended.

The difference with a fixed-term contract is that your employer must go through a full procedure for this, rather than simply waiting for an end date.

But your employer must pass a strict test

If your employer wants to give you notice, prior permission from the UWV (the Dutch Employee Insurance Agency) is required. The UWV assesses whether the business economic necessity has been demonstrated, whether the selection is correct and whether reassignment has been examined.

It is precisely that procedure that gives you leverage. Errors in it strengthen your position, and that is one of the reasons an employer often prefers to reach an arrangement.

Your protection with a permanent contract

Prior permission from the UWV is required to give notice
Assessment of the business economic necessity
Selection through the reflection principle (afspiegelingsbeginsel)
Your employer's obligation to seek reassignment
A statutory notice period of one to four months (Art. 7:672 BW)
In most cases entitlement to the statutory transition payment
In most cases entitlement to an unemployment benefit (WW)

The four steps your employer must take

In a business economic dismissal of a permanent employee, the UWV tests a fixed set of points. On each of them your position can be strengthened.

1. Business economic necessity

Your employer must demonstrate that the elimination of jobs is necessary for sound business operations, for example through a structural decline in turnover or workload. A general reference to a reorganization is not enough; the UWV assesses the substantiation critically.

2. Reflection principle decides who

Your employer determines which jobs are eliminated. Where positions are interchangeable, the reflection principle (afspiegelingsbeginsel) then determines which employee is eligible for dismissal, spread across age groups and based on length of service. Incorrect application can lead the UWV to reject the dismissal request.

3. Reassignment first

Before dismissal is possible, your employer must examine whether you can be reassigned to another suitable position within the organization or group, if necessary after training. Only when that is demonstrably not possible may the employment end.

4. Notice period and payment

On notice a statutory notice period of one to four months applies, depending on your length of service (Article 7:672 BW). The duration of the UWV procedure may be deducted from it, with a minimum of one month. In addition, you are in most cases entitled to the statutory transition payment.

Your negotiating position is stronger than you think

Many reorganizations end not at the UWV, but with a settlement agreement (vaststellingsovereenkomst). That is no coincidence, and it works in your favour.

Why your employer often offers an arrangement

The UWV route costs your employer time and carries a real risk: if the reflection principle is wrong or the reassignment is insufficient, the request is rejected.

A settlement agreement removes that risk for the employer. As a result, in many cases room for negotiation arises.

What can be negotiated

It is not only the amount of the payment that is open to discussion. The end date, a release from work, outplacement, the settlement of bonus and holiday days, and a non-competition clause can all form part of the arrangements.

A payment above the statutory transition payment does not arise automatically, but for example through a social plan, negotiation, or seriously culpable conduct by the employer.

Look beyond the sum of money as well. Having a non-competition clause lifted entirely can be financially even more valuable to you than a higher payment. The total value of the arrangement is determined by the whole, not by the payment alone.

Often negotiable in a settlement agreement

A payment above the statutory transition payment
The end date and the notice period
Release from work with continued pay
Outplacement or a training budget
Settlement of bonus, holiday days and year-end payment
Removing or limiting a non-competition clause
A contribution towards your legal costs

What to watch for in a settlement agreement

A good arrangement starts with a correct agreement. On a few points a careless settlement agreement can cost you money or your benefit.

Watch your WW benefit and the notice period

For your right to WW, the UWV assesses the agreement as a whole. What matters most is that there is no urgent cause for dismissal and no culpable unemployment. Wording that points to an urgent cause or to your fault can put your WW benefit at risk.

Also watch the end date. If the agreement sets an end date before the end of your statutory notice period, a period without pay and without benefit can arise. The end date should therefore align with the correct notice period.

You have reflection time

After signing you have 14 days of statutory reflection time to revoke the agreement without giving reasons (Article 7:670b(2) BW). If that reflection time is not mentioned in the agreement, the period is three weeks.

Before you sign

Have the agreement assessed legally before you agree
Check that the ground for termination is worded so that it is WW-safe
Check that the end date aligns with your notice period
Ask your employer for an explanation of the business economic necessity
Ask how the reflection principle and reassignment were assessed
Do you feel pressure to sign quickly? That is precisely a reason to seek advice first

What you can do now

If your employer announces a reorganization and you have a permanent contract, it is wise to take the steps below. The sooner you map out your position, the more options there are.

Ask for a written explanation of the reorganization and the reason your position is being eliminated
Ask for insight into the application of the reflection principle and the reassignment options examined
Gather your employment contract, length of service and salary details
Keep all correspondence and documents you receive
Have a proposal assessed legally before you agree

ReorgLegal assesses your full situation: the business economic substantiation, the selection, the reassignment efforts and the proposed exit package. On that basis we determine what negotiating room there is and what would be a reasonable outcome in your situation.

Frequently asked questions

Can I be dismissed on a permanent contract just like that?
Not just like that. Your employer needs a business economic ground and prior permission from the UWV, and must apply the reflection principle and reassignment correctly.

Do I have to sign a settlement agreement?
No. You are not obliged to sign. If you do not, your employer must follow the UWV route, which costs time and carries risk for the employer.

How much payment will I receive?
On dismissal you are in most cases entitled to at least the transition payment, calculated as one third of the gross monthly salary per full year of service, plus a proportionate part for any remaining period. In a reorganization there is sometimes room for more, depending on the circumstances.

Will I be the first to go as a permanent employee?
Usually not. The selection follows the reflection principle and a statutory dismissal order, in which for example agency workers, on-call workers and employees who have reached state pension age often come up earlier. A permanent position can, however, also be eliminated through the reflection principle.